Washington ? Israeli Prime Minister Ariel Sharon renewed an offer of eventual Palestinian statehood Thursday at the White House as President Bush demanded a 100 percent effort by Yasser Arafat to fight terrorism.

With Sharon at his side in the Oval Office, Bush said firmly: “Mr. Arafat has heard my message  I can’t be any more clear about it  that he must do everything in his power to reduce terrorist attacks on Israel.”

At the same time, Bush endorsed the Israeli leader’s commitment to statehood, saying the Palestinians also had to recognize Israel’s right to exist.

“I assured the prime minister that we would continue to keep pressure on Mr. Arafat to convince him that he must take serious, concrete, real steps to reduce terrorist activities in the Middle East,” Bush said.

Sharon, however, dismissed Arafat as “an obstacle to peace” and proposed a pressure campaign to find a new leadership for the Palestinians. Arafat has “chosen terror and formed a coalition of terror,” Sharon said, and must be pressured “in order, I hope, to have an alternative leadership in the future.”

Sharon and Bush met for 50 minutes, sharing a joint commitment to oppose terror. Bush gave no hint in his exchanges with reporters what steps he might take if Arafat continued to resist his demands. However, he said nothing about severing U.S. ties with the Palestinian leader, and Sharon said later the matter did not come up in their meeting.

Bush stressed the difficulties of the Palestinian people, whose lives have been constrained by Israel in its attempt to avert attacks.

“I am deeply concerned about the plight of the average Palestinians, the moms and dads who are trying to raise their children,” he said.

Bush said he had $300 million in the budget to provide assistance to Palestinians, and Sharon, taking the cue, promised to do what he could in their behalf.

And Sharon, renewing a promise of statehood, said: “I believe at the end of the process we will see a Palestinian state. But only at the end, in the final steps” and after there was “a full cessation of terror, violence and incitement.”

Bush said he was “at first surprised, then extremely disappointed” by Palestinian efforts to smuggle in 50 tons of Iranian weapons by ship.

For his part, Sharon accused Arafat of waging “a strategy of terror.”

“I personally, myself and my government, regard Arafat as an obstacle to peace,” the Israeli leader said.

Sharon, who has imposed virtual house arrest on Arafat on the West Bank, wanted Bush to cut more than a decade of U.S. contact that followed the Palestinian leader’s public repudiation of terrorism.

But that is a door the Bush administration does not want to shut  at least for now  even as it applies heavy pressure on Arafat to curb Palestinian attacks on Israel, to make more arrests and to take responsibility for trying to smuggle in the Iranian rockets, mortar and explosives.

“I made our government’s position about as clear as I could,” Bush said. “I haven’t changed my position.”

The president noted that he was dispatching Vice President Dick Cheney on a tour of the Middle East. Cheney will visit Israel and eight Arab countries in mid-March.

He said one of Cheney’s missions would be to look leaders of the region “in the eye and letting them know that when we say we’re going to fight terror, we mean it.”